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Company Data In C$

Dividend $0.34 Shares O/S (mm) 146.3

Yield 6.93% Market Cap (bn) $2.870

Consensus Estimates In C$

(FY – Dec.) 2018A 2019A 2020E 2021E

AFFO/Share $1.96 $2.14 $2.23 $2.11

EBITDA (mm) $393.2 $402.3 $459.7 $470.7

Valuation 2018A 2019A 2020E 2021E

EV/EBITDA 10.7x 11.1x 10.3x 10.9x

GEI - TSX Rating Outperform

Price: Oct-30 $19.62

Target $26.00

Total Rtn 32.5%

⚫ Gibson Energy (“Gibson” or “GEI”) is a leading Canadian midstream company based in Calgary, Alberta. The Company’s operations consist of Infrastructure and Marketing segments strategically located in Western Canada that are engaged in storage and distribution of hydrocarbons across North America.

⚫ The Company generates stable, fee-based cash flows through its Infrastructure segment which includes 14 mmbbls of oil storage terminals, processing facilities, gathering pipelines, and exclusive rail terminal access in Hardisty (Gibson Energy Inc, 2020).

⚫ Gibson’s Marketing segment involves purchasing, selling, storing, and blending of hydrocarbons which helps to drive volumes to the Company’s infrastructure assets and earns margins by capturing quality locational or timely arbitrage opportunities.

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Business Description

Industry Overview & Positioning

⚫ Well-positioned asset base in Hardisty: Gibson is the second largest storage operator in Hardisty and has developed leading pipeline connectivity over decades, evidencing Gibson’s difficult-to- replicate storage asset position (Gibson Energy Inc, 2020).

⚫ Quality contract profile: Gibson generates 80% of its cash flows through long-term, fee-based contracts that remove volume and commodity price risk and allow the company to deploy capital into Infrastructure growth projects and its attractive dividend yield (Gibson Energy Inc, 2020).

⚫ Attractive internal and external growth prospects: Gibson has sizable undeveloped acreage available for terminal expansions and is positioned to benefit from additional external pipeline takeaway (KXL, Line 3, and TMX) that would increase storage demand.

⚫ Strong defensive positioning: With leverage of 2.7x Net Debt-to- EBITDA and no material debt maturities until 2025, Gibson has the best liquidity position in its peer group (Bloomberg L.P., 2020).

Investment Summary

⚫ Gibson primarily operates in the oil & gas storage segment of the energy infrastructure sector which is consolidated among a few major players. Gibson is the third largest operator in Western Canada and operates 35% of all storage in Hardisty (Oil Sands Magazine, 2020).

◼ Peer group includes Pembina Pipeline, Inter Pipeline, Keyera, TC Energy, and Enbridge.

⚫ The Company has been in Hardisty since the 1960’s and has been able to develop best-in-class connectivity to inbound and outbound pipelines as aa result. This connectively advantage allows Gibson to provide cost advantages relative to its peers. Furthermore, the business has exclusive rail terminal access out of Hardisty, making Gibson the sole point of DRU egress out of Western Canada (Gibson Energy Inc, 2020).

⚫ Gibson is the only Canadian energy infrastructure company that has a storage-focused strategy which allows its business to be shielded from energy market volatility relative to its commodity-exposed peers that have been hit harder by 2020 market conditions.

⚫ As a result of Gibson’s wide moat at Hardisty and highly contracted business model, the company can achieve strong financial performance regardless of energy prices and sentiment.

Gibson Energy Energy Infrastructure

⚫ Analysis of various value drivers implies that Gibson trades below its intrinsic value. Median valuation price suggests a 10.5x EV/EBITDA trading multiple in contrast to its current 8.8x EV/EBITDA multiple (Bloomberg L.P., 2020).

Valuation

$10.96

$22.00 $22.84

$25.65 $23.47

$28.34 $30.00

$26.59 $28.78

$27.21

52 wk hi/lo Analyst Targets Comps Precedents DCF Range

Median $26.00

Current $19.62

Note: All financial information from Bloomberg L.P. as of October 30, 2020. DCF Range based on company guidance.

References

Bloomberg L.P. (2020). Gibson Energy Financial Statement Analysis, 2018 - 2021. Retrieved November 5, 2020 from SFU Bloomberg Terminal.

Gibson Energy Inc. (2020). November 2020 Investor Presentation. Retrieved from https://www.gibsonenergy.com/getattachment/56dfdce7-bea9-4531-9739- 36aab749e6f7/November-2020-Investor-Presentation

Oil Sands Magazine (2020). Oil Storage Terminals. Retrieved November 5, 2020 from https://www.oilsandsmagazine.com/projects/crude-oil-storage-terminals

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